The present invention relates to a process for converting lactose to small molecules and/or value added lactose derivatives. Lactose or milk sugar, a disaccharide carbohydrate, is the ingredient of whey, the main by-product of cheese production in the dairy industry. Several million pounds of lactose are available annually as a by-product of cheese production; however, the numbers of subsequent uses are limited. Most of the lactose is disposed of in wastewater which leads to additional environmental problems. Therefore, it is desirable to minimize some of those wastes, either by converting lactose to smaller molecules more appropriate for disposal, or preferably, to a value added lactose derivatives.